tv Bloomberg Markets Americas Bloomberg February 27, 2019 10:00am-11:00am EST
chairman powell testifying before the house financial services committee. of a day on capitol hill not to mention internationally. guy: absolutely. party stancendia story with 30 world markets a little bit earlier on. that is a focus for us over the next few hours. what is happening on capitol hill, probably the dominant story. i wonder where this cohen hearing is the start of congress taking over the investigation that thus far has been conducted by mr. mueller, whether or not this is the beginning of that process. it will be fascinating to hear what he said today. vonnie: we already have testimony so we know exactly what michael cohen will be saying. this is the first time the public will be hearing directly from michael cohen. let's get to greg farrell, who is following all of the michael cohen affair, let's call it.
and bob mueller investigation. we know the president will be called several names, some theater with a check presenting ceremony and so on. what will impact the president most from what michael cohen says today? greg: this is the first time we will get inside the room with the president during key moments of the campaign. some of the things michael cohen is going to testify about, according to the testimony that of've seen, makes him aware the trump tower meeting with his son and the russian lawyer. this has not been tied together before. this does not rise to the level of evidence that someone like robert mueller could use but it's an eyewitness recollection that could be more powerful than a dry court case filed by robert mueller. and: will be a big impact taking a lot of americans inside the inner workings of the trump campaign and white house.
guy: is this the start of congress playing a bigger role in this process? greg: yes i think you're right about that. mother's job has been investigative, took -- robert mueller's job has been investigatee, to crimes. this has become a political issue and the president's future will be determined by other elected officials, not by a prosecutor. i think this is the first step in that direction. vonnie: we know mr. cohen will begin his three-year sentence may 6. he's going to be calling the president a liar, among other things. there is precedent for this. what will congress do with this kind of information? greg: the fact that he is liar, thethat he is a fact that the president's spokeswoman calls him a liar and therefore should not be believed does not disguise the fact that he worked for trump for 10 years
and says a lot of his lies were based on what he wanted the president to do. on his sentencing he does not have report for jail until may. i think we will find he is still cooperating with the u.s. attorneys office in manhattan and i presume he's hopeful that the more testimony provides, he might eventually get his jail sentence cut back slightly further. vonnie: it appears we are getting some gop challenges here at the hearing. that is what we were anticipating and it has begun. first, let's get to another hearing, the second day of fed chair jerome powell testifying today. michael mckee is with us. let me just mention factory orders came in disappointing for december numbers. durable goods, transportation, they were up by .1%. the other piece of data, home
, perhapsisappointment not as bad as forecasted for january, down 3.2 percent. what will we hear from the fed chair that might add to our knowledge of the economy? we did not hear much yesterday. michael: i cannot be as exciting as the michael cohen hearing. jay powell is going to repeat what he said yesterday that the fed is on hold because they're waiting to see what happens with the crosscurrents affecting the economy, the slowdown in china and europe. the trade wars and that brings us to the lighthizer hearing that's going to be held at the same time. something that would have garnered complete headline control if not for all the other stuff going on. people want to know what's going to happen in the trade wars because it matters so much to so many economies. there is not a whole lot new to expect out of jay powell unless they get into some sideline arguments over the green new deal. alexandria ocasio-cortez is on
the financial services committee , the sponsor of legislation. the legislation calls for the thebasically to finance green new deal by buying green bonds and putting them on the balance sheet. there may be some back and forth . i would not expect a lot of fireworks on the powell side of capitol hill today. guy: hasn't powell confirmed the existence of the ?erson the sequencing of the priorities was fascinating. he talked about the markets first. doesn't that confirmed the existence of the -- they want the markets michael: to know that they are not going to be making any precipitous moves. people on capitol hill, it's not going to affect what's going on and what the fed says is not really going to affect what's on capitol hill right now but it does affect what goes on in the markets. jay powell is sensitive to the fact that his testimony goes beyond the hearing room, to wall
street. wanted to make sure that everyone knows the fed is going to follow through with what they've been saying. it's not new but he wants them to know there's no change. one of the questions that was not really answered, any detail on the balance sheet. that is something wall street wants to know about so it's possible he gets asked more about that today. vonnie: i want to bring viewers up-to-date in the cohen hearing. representative mark meadows raising the issue that the testimony itself was not received 24 hours in advance. he says this is intentional and he's looking for a delay. he says it violates the committee rules. elijah cummings, who is chairing the hearing, is going to be answering that. let's go to our international correspondence because president trump and north korea's kim jong-un are beginning their second high-stakes summit in vietnam. kevin cirilli is live in hanoi.
you can be sure the president is keeping a close eye on what's going on in washington, unclear whether he is happier to be outside of d.c. right now. kevin: president trump just wrapped up dinner with north korean chairman kim jong-un. they talked for about 30 minutes. the president was accompanied by secretary of state mike pompeo as well as acting chief of staff mick mulvaney. said he's hoping -- will be aan "successful day ago he noted north korea's tremendous economic potential. he was certain the great outcome everyone is glad to see will be made and will do his best to make it happen.
nuclear experts as well as the defense community act in the united states. i reached up to one representative who said they are not sure what precisely president trump will be able to accomplish especially as north korea has continued with missile capabilities and nuclear proliferation ambitions. from here there's the summit tomorrow. the president is keeping a close eye on some of the developments back home. he tweeted out hours before they had dinner that -- he called "liar." then a president will go behind me to .hat building those day long hours or so negotiations with kim jong-un. guy: kevin cirilli, thank you very much indeed. amazing how events in hanoi are being overshadowed by what's happening in washington and
turning now to escalating tension between the nuclear armed india and pakistan. .e are joined by chris k clearly escalation has taken place. path to an obvious de-escalation? >> there's a huge amount more .nternational pressure the u.s., u.k., china have weighed in and said there needs to be talks. pakistan calling for talks as well. unclear where india goes from this area the ball is in their court. prime minister modi is under pressure to react to this pilot being downed and captured. weeks away from election. guy: that seems to have been the defining moment within this otherwise you could have seen this as a similar skirmish that we've seen previously. the fact that they captured the pilot seems to be what this
pivots around. >> lots of people expected this to played out the same way. pakistan said this did not happen. personally i expected that the happen. this morning's news has really changed that dynamic. i think a lot rests on what happens with this pilot. apparently he is being paraded on pakistani tv saying he's being treated well. a huge amount depends on what happens now with the situation. guy: thank you very much. chris k on the latest of what's going on between india and pakistan. vonnie: i want to mention in the lighthizer testimony we are getting headlines. more china purchases alone are not going to be enough for a deal. the desire forof structural change. no challenge in the trade space
greater than china. we will be keeping our eye on the lighthizer hearing. you can follow all of these hearings on the bloomberg and .et commentary in the markets we are seeing indices lower but just by about one third of a percent apiece. the nasdaq down about one half of a percent. followingll has been all of the happenings. how will mueller be watching what happens today? than likely going to be a closed report until congress tries to unseal parts of it. greg: correct. i don't think he will necessarily watch it. his people have interviewed cohen multiple times. anything that michael cohen is saying is known to mueller and prosecutors. no news in it for him. " affect him. the report is expected to come out as soon as next week or sometime in the month of march. it will be delivered to the
attorney general. some ofwe will see that the allegations michael cohen is making are not necessarily given the weight of evidence that would convince a jury beyond a reasonable doubt that the president did x or y. what michael cohen is saying today will be powerful in terms of having an impact on public opinion but it's not the type of thing necessarily that would stand up in a court of law. vonnie: what will hurt president trump most? we know we are going to hear the news during the 2016 that roger stone was talking to julian of dnc about the release hacked emails. we're also going to hear there was money reimbursed to michael cohen that went to stormy daniels, hush payment effectively. greg: while he was president. vonnie: we will also hear words like cheat, liar, racist. what will go to the trump's core
most? greg: he's very concerned about his personal image and the small detail about how sensitive he was about his sat scores and his grades. this is a guy who badgered president obama for years first for his birth certificate and then for his grades and claimed he was not smart enough to be at harvard yet michael cohen wrote multiple letters to fordham university, other places trump attended pointing out any disclosure of his grades will expose you to criminal and civil liability, threatening letters to prevent trumps actual grades from coming out. it should not see major but it's the type of thing clearly the president is sensitive about any attack on his self-image. vonnie: republican committee members of tried to have this hearing delayed. they will try to discredit cohen .
what will we see today in the house? will democrats have a goal beyond just pushing michael cohen on the president? vonnie: now the democrats are in charge this is -- greg: now that the democrats are in charge, this is typical behavior. this happened when republicans were in charge and democrats would make those complaints. the hearing is going on. this will come out today. by winning the elections in november they get the ability to push forward. the republicans will claim accurately that michael cohen is a liar but this is standard in courtroom dramas when you have a cooperating witness any good defense lawyer goes after that witness and points out to the jury that this guy is a liar. what we have today, what michael cohen has delivered is corroborating evidence. exhibits that show president trump did sign the check in august of 2017. that he did provide claims to deutsche bank that his assets
were this when we will see whether or not they were. that is how a cooperating witness who is admitted liar gets stood up to be credible when there is corroborating evidence presented. guy: we've already seen some of mr. trump's reporters -- some of his supporters, getting their response in first. is that it indication of how worried they are about what is happening today? greg: absolutely. the level of response. any time something sensitive is going to come out regarding the president it's almost a fever pitch among the most aren't supporters in congress. in other words they fear this could have a big impact so they are trying to do as much as they can to damage cohen beforehand to delay this and get a hold of his testimony to try and ripped it up. bad understand this is a day image wise for the president.
guy: can i come back to the legal jeopardy conversation we were having earlier on? how it relates to the mueller probe. cnn reported i think it was back in november president trump's written responses to the mueller probe included a denial mr. stone had told him about the wikileaks connection. is the water as muddy around that issue? how problematic is that from a legal point of view? greg: that would go to whether or not the president of struct it the investigation. practice aprovided testimony
lot of background has been plowed. many of these people have political agendas and you often see that particularly on the house side although there is less politics involved at the moment because there aren't any real fiscal initiatives on the economy. maybe they will ask about and for structure spending in the future and probably there will be talk about powells warning yesterday that our fiscal house is not in order and that we need to do something about the national debt. is it going to be a problem? so far it has not pushed up
interest rates. interesting debate could be had. he will see if they go in that direction. guy: modern monetary theory. the idea that debt does not matter. in terms of the level of pushback he's going to get on that today presumably from one point of view a kind of democratic view of debt is different to the republicans. republicans of always been concerned about the levels of debt and united -- that the united states carried. in some ways you get a more relaxed view from the other house. greg: it all depends on who is in power. when the democrats were in power under the obama administration and raising the debt in order to combat the recession it was a terrible thing and its bond the tea party and a lot of members of congress on the republican side in office today but when donald trump wanted to cut taxes significantly and raise deficits
beyond what obama did it is ok for them. somepends on who's -- at point theory tells you there would be a crowding out in interest rates would have to go up but the market can only absorb some any treasuries. we don't know where that limit is yet are you modern monetary theory is an interesting offshoot of this argument. canhe point that anyone define it, if you print money in your own currency you can print as much as you need as long as inflation does not break out and away you control inflation is not necessarily through the central bank but by the fiscal authority raising taxes. at this point they say there's a lot of space to be able to fund projects. jay powell said we don't understand exactly what mmt is. we disagree you can go that far that you can print a lot of money. we think there will be a problem with the national debt. the question today is when do we get there. vonnie: there are company earnings out today that are
impacting the market indices that are lower. great earnings from best buy up 16%. campbell's soup up 7%. macy's up 3%. on the negative side, mylan down 10%. about half as down percent. in terms of asset classes that may be impacted by the powell hearing, the dollar index is holding its own above 96. a stronger british pound brexit hopes are not quite materializing. at 11082 --rading 1.1082. nevertheless, this may have a longer-term impact on the markets because it may have a longer-term impact on president
trump's ability to govern, right greg? greg: so far as the markets stability any attack or suggestion or evidence that undermines the credibility or suggest that the democrats might be more aggressive in pursuing the president would create some level of instability. i'm not a market expert but i would imagine any instability at the top of the united states government would have an effect. .uy: twitter is never far away is an advantage or disadvantage that the president is out of the country right now? greg: that is a good question. the distance might actually help him especially if it keeps them away from twitter. but that's a political call. up andearly staying watching this. kevin cirilli reported earlier. i imagine we will hear from him depending on what this says.
vonnie: it might actually give -- some impetus to get home to get an agreement at of kim jong-un or something positive to get back. just to let you know in terms of the hearings michael cohen has not started giving his testimony at. jim jordan is speaking attacking who worked for the clintons saying the hearing is being brought to you by clinton friends lanny davis. saysately it is what cohen that's going to have the impact. the hush payments, the racism comments, and wikileaks is a massive deal. that he knew roger stone and julian assange were talking. greg: not only that, the exhibits are you can talk about clinton and lanny davis but there were documents that i think are available now. assets and liabilities trump sent to deutsche bank between
2011 and 2013, valuations of his assets that suddenly spiked up in 2014. i think that's being reported now. these are the types of things in response to any political argument of why we are doing this. actual documentary information about what the president's claims are and how they don't match up to the reality. guy: can you explain to an international already and's -- international audience why this hearing is being held in publicly while others are not. what i assume because michael cohen will be a will to testify today he's told prosecutors and it does not involve ongoing investigations. anything you are hearing today is something that prosecutors already know. the other ones regarding the house intelligence and i think the senate intelligence committee are more likely to
going to national security issues are might touch on them in such a way that should not be made public especially in the senate committee which is controlled by republicans. they might not have an interest in having a public hearing which turns into a big spectacle that the michael cohen testimony already is. vonnie: what we going to hear about the idea that there were negotiations are talks going on about a moscow high-rise and that this happened even at the beginning of the primaries? greg: the trump campaign's position from the start was i have no business with russia, no ongoing negotiations and michael of thes at the center attempts to keep that going not only graduate of 2016 but according to michael cohen the president was hoping if you lost you have a big financial score in moscow. vonnie: cohen has just been sworn in. >> you are now recognized to give an oral presentation of your testimony.
nejra: chairman : i asked this committee to ensure that my family be protected from presidential threats and that the committee be sensitive to the questions pertaining to ongoing investigations. i thank you for your help and your understanding. i am here under oath to correct the record to answer the committee's questions truthfully and offer the american people what i know about president trump. i recognize that some of you may doubt and attacked me on my credibility. it's for this reason that i have incorporated into this opening statement documents that are
irrefutable and demonstrate that the information you will hear is accurate and truthful. did iin a million years imagine when i accepted a job in 2007 to work for donald trump that he would one day run for the presidency. to launch a campaign on a platform of hate and intolerance and actively when. i regret the day i said yes to trump. i regret the help and support i gave him along the way. my failings and publicly accepted responsibility for them by pleading guilty in the southern district of new york. i'm ashamed of my weakness and my misplaced loyalty of the things i did for mr. trump in an effort to protect and promote him.
i am ashamed that i chose to take part in concealing mr. trump's illicit acts rather than listening to my own conscience. i am ashamed because i know what mr. trump is. he is a racist, he is a con man, and he is a cheat. a presidential candidate who knew that roger stone was talking with julian assange about democratic national committee mills. i am providing the committee today with several documents and these include a copy of a check mr. trump wrote from his personal bank account after he became president to reimburse me for the hush money payments i made to cover up his affair with
an adult film star and to prevent damage to his campaign. copies of financial statements 2013 that 2012, and he gave to such institutions as deutsche bank. a copy of an article with mr. trump's handwriting on it that reported on the auction of a portrait of himself. that he arranged for the bitter ahead of time and reimbursed the bitter from the account of his nonprofit charitable organization with a picture now hanging in one of his country clubs. vonnie: the first couple of pages of a 20 page report from michael cohen. he will be continuing to act -- to accuse the president of all sides of things. another part of capitol hill we have fed chair powell
toivering his policy reports the house panel. he's repeated word for word the statement from yesterday. he will be facing different questions and we will be diving into that in a moment. haverd hearing today, we lighthizer talking about trade. structural changes will be needed more treasury purchases and more purchases of things such as soybeans will not be enough to satisfy the u.s. to get some kind of a deal. we do know that march 1 deadline for imposing additional tariffs on china has been extended. at this point let's dive into the questioning of fed chair jerome powell. ms. waters? appears tocy of
be following through wit -- not undermining safeguards built up in the last decade tube protect our economy in which made the u.s. framework the gold standard that others around the world follow. should we expect to see further industry consolidation if deregulating big banks is a top priority for the federal reserve . it was discussed in the senate banking committee yesterday how the fed has accelerated its merger reviews and appears to be rubberstamping them. bb&t claimed their proposed merger will be approved by september. can you us -- can you assure us that the fed will not rush the process, consult with all affected parties, whole field hearings and focus on the public's interest even if it means rejecting the applications ? the occ released advance notice of proposed rulemaking to
modernize the community reinvestment act or cra. the fed and the fdic did not join that release. the contraled to see lori's and said if he could not reach agreement with your agencies the occ would go on its own with cra reform. with that be a good outcome? told different regimes lead .ash a minute on diversity i believe diversity in the federal reserve's leadership including at the reserve banks is crucial because it is hard to stay committed when the leadership lacks an understanding of these communities it comes from experience. i and so many on this side of the aisle have pushed to
diversify to more closely represent the american public. directors areard 74%banking or business, white and 62% male. they also cite that in 2013, 12 of the 105 or directors were african-american. that number has increased to 22 out of 108 today. this is an improvement but it still does not look good. federal reserve governor brainard recently spoke about increasing diversity efforts at conference.ander right now even before search is how is the federal reserve trying to build a pipeline for more diverse candidates?
when you meet with reserve bank leaderships how are you encouraging a focus on increasing director diversity? how do believe increasing diversity is a challenge? in your testimony he stated current economic conditions are healthy and the economic outlook favorable but noted over the , "uncertainty is elevated around several unresolved government policy issues." i won't put it as delicate as you have. president trumps policies are damaging. this is why you have had to pause rate hikes. this lack of an economic agenda that changes with the wind is presenting market volatility and incredible uncertainty. you said just yesterday that uncertainty is the enemy of business. that is why former federal reserve chair janet yellen says the president does not understand macroeconomic policy.
if he did he would understand only a stable inclusive economic agenda will support economic expansions. the president is engaged in a trade war with an uncertain outcome that seems to change every other week. also forced the longest government shutdown in our nations history. how are these actions affecting the u.s. economy in your estimation? how can you continue to achieve full employment and stable prices if this erratic economic agenda persists? on monetary policy and the theutes released for meeting29 30 -- what can be seen from the gradual balance sheet
reductions that began in october 2017, the faux mac noted is likely to stop producing the balance sheet which stands at $3.9 trillion. i believe in -- the thought is to allow the reduction to it is comfortable with the size of the elevated balance sheet later in the year. where the fed funds rate is 2.50%low between 2.25 and theis and likely to use balance sheet as a tool in the case of an unexpected downturn? san francisco federal reserve bank president mary daly has suggested you use a balance sheet as a regular monetary policy tool. does this mean qe could become routine in this lower interest
rate environment? this intel buying securities as the fed did during the financial crisis at a similar size and pace? or could you consider smaller scale purchases? recognize thell distinguished ranking member, mr. mchenry for five minutes for questions. >> good morning. chairman powell i have a series of questions for you and i would love to have your answers on these questions. you testified yesterday regarding the banks balance roughly $4 stands at trillion. you gave an answer about normalizing the answer sheet and what your view looks like. you referenced the demand for
reserves as a reference point for that. can you elaborate on that? to. would be glad before the financial crisis the size of the fed balance sheet -- principally currency and reserves to a less extent. we get the zero lower bound the fed buys a lot of assets. that was about buying assets. the size of the balance sheet went from 6% to 25%. that was driven by a desire to buy longer-term credit assets and drive down long-term interest rates. now we are normalizing the balance sheet and normalizing it means going to a situation where the size of the balance sheet is driven by demand for liabilities. demand for currency has grown much faster than the economy and demand for reserves is higher
than it was. we require banks to hold high levels of quality liquid assets and the jews to hold reserves. we can't go back to that small balance sheet. -- the committee has been working on this and devising a plan. we are close to agreeing on a plan which would lay out -- which would like the way to the process. nejra: do you plan to communicate that? nejra: yes we do. when it is agreed. we found it's good to be careful with the balance sheet. nejra: your reference point was fed. $1 trillion at the the reference point for when you and the reduction of the balance sheet. do you have a timeframe on that? nejra: there's a lot of uncertainty around the actual level. i said those public estimates appear reasonable. we will have to find equilibrium
demand over -- nejra: so in light of ,esterday's housing figures what impact housing figures froy have in your timing on holding rates steady or do they have any impact. >> we said we're going to be patient and watch as the economy evolves and also as the evolving risk picture changes and how that affects -- how that will affect the outlook. we will look at a full range of data and include housing starts. anything that could affect our achievement of the doom mandate, principally growth and labor markets and inflation. looking at a wide range of data. that's one piece of it. it's one of many pieces. >> related to that, housing finance reform. fannie and freddie are more than a decade into naturalization.
you are a major holder, the fed is a major holder of these assets. do you think it's important for congress to prioritize housing finance reform for the american economy? >> i do. this is a big unfinished piece of business for the post crisis era and i think it would be good for the economy and to move to a privatehere a lot of capital is supporting housing risk again and it's not just winding up on a thorough balance sheet. >> the result of some recent statements, there were a lot of crosscurrents conflicting .ignals in a terminology how do you respond to those who say you are making financial market stability and unofficial mandate to the fed's decision-making? >> i would not say that's what
we're doing. i think financial stability has been part of the fed's role. it was our original role. central banks involved out of a desire to support the stability of the financial system. our mandate is maximum employment and stable prices. we also look after financial stability as it -- >> but not necessarily stock market stability. >> financial stability we are talking about the capacity of the financial system particularly banks but other aspects to perform their role and intermediate between savers and borrowers. >> what do you say to those folks who claim there is a powell put in the market? >> anything that matters for the dual mandate matters to us. our tools work through financial conditions. i would say when there are major changes in broader financial
conditions, as you point out not anyone market or set of markets, sustained period important changes in broader financial conditions that matters for the macroeconomy. it matters for achievement of the dual mandate and we will take that into account. >> you mentioned headwinds internationally. the softening of the eu, the chinese economy, the risk of brexit we see what's happening internationally for global terror and things of that sort. i want to talk about china specifically and ask about this. how does china's use of state run banks to allocate credit affect financial stability for the rest of the world? know that there are important indications for global financial stability. i know they are trying to move
to a more market-based system over time and that is a challenging transition. >> more to this point it is an opaque market. getting numbers and a solid understanding of that allocation of capital is more difficult in china that it is in the rest of the first world. >> that's right. much of theso economic activity has the backing of the central government. >> let me just wrapped up with a broader question. you legend our national debt. the debt and deficit challenges a real one. commencement with long run obligations that we have to the american people but fundamentally our deficit does have an impact on your dual mandate, does it not?
>> i would say in the longer run. >> and our national debt in a longer run has an impact in fed policy making as it results instability and full employment, does it not? >> the unsustainable half of the federal government is a longer run problem. most of our thinking is about is the cycle frequencies. holding it back when it is overheating. that is just in general. not so much about fiscal in sustainability. we will wind up spending our money on interest payments rather than on the things we really need. >> thank you very much mr. chairman. as you answer the questions they will be overlapping. feel free to expound on some of the questions. i took up all the time and did not give you an opportunity to
answer those questions. thoseree to include in answers some of the concerns. the gentlelady from new york, mr. velasquez, recognized for five minutes. >> thank you madam chair. chairman powell, thank you for being here today. i've heard from several constituencies who have expressed concern about the , the current expected credit loss methodology can have on lending to consumers and small businesses. they tell me the proposal could -- especially in a downturn and would disproportionately impact consumer lending and lmi who can least afford the increase in the cost of credit or a complete loss altogether.
much of the talk thus far has been about accounting policy. what about economic policy? has the fed conducted a review of the economic impact particularly in a downturn? we've tried to think carefully about the questions that have been raised by banks about this. we've thought a lot about this over time. we tried to work with banks so they will be able to implement this in ways that are not too disruptive or expensive or complicated. to start aed banks three-year phase-in beginning next year. we're doing everything we can to .void a big change we will be watching to see what
the results are. >> i'm not concerned about how the banks will be handling this. i am concerned about the economic impact it could have on mortgages for a segment of our population who is already -- who has been not participating in capital access. orh as low income borrowers small businesses. have you conducted any economic impact on that? december meeting discussions they discussed this issue. are aware of those concerns and we will be watching to see whether there is any such effect. we don't expect but we will be watching carefully to see. atyou recently gave a speech mississippi valley state university that addressed
economic challenges in rural areas. while new york city is certainly not rural i believe many of the challenges you spoke about could apply to urban centers, particularly those of color. in that speech you noted the importance of workforce training due to the loss of key industries and the resulting between workers and those demanded by new employers -- between skills of workers and those demanded by new employers. should banks received cra credit for supporting or participating in such workforce development programs? question. a good i don't know whether that would get cra credit or not. i was speaking at a conference that was looking at broad measures to alleviate poverty. i will check into that.
>> thank you. , in the chair already alluded to this, the controversy he was hopeful that all three bank regulators will join reforms by the summer. also it indicated if you're not all able to agree they would be willing to propose reforms on its own. governor brain are stated figure look -- federal regulators should speak with one voice. what is your view? >> i think ideally we would like to have a unified view. it would be better to have one agreed upon framework for cra. we will be working toward that. i want to add we are very committed, the fed thought to the mission of cra looking to make it more effective.
>> should they be a joint rulemaking and do you believe the fed will ultimately sign onto the occ proposal? >> i think it would be ideal for the three regulators to get together and we are working with the other agencies on that. i think the goal is to get to a joint -- >> i yield back. >> the gentleman from oklahoma is recognized for five minutes. >> thank you chairwoman. forrman powell, thank you being here. i believe my colleagues will do an outstanding job of covering the broader issues with a number of inquiries. i'd like to focus on some particular issues and if we could converse about the joys of derivatives. my questions will deal with those issues within the federal. first turning to an issue i've raised several times,
interestingly at margin. transactions between affiliates do not expose counterparties to each other's risks. i've pushed with my colleagues to exempt those transactions from initial requirements. the cf t c and european regulators agree with me in the to is not changed its policy be consistent when it comes to bank swap dealers. i understand these issues predate your tenure but i would like to know if you intend to pursue a more risk reflective approach on initial margin for inner affiliate swaps. a i know we have not made decision on that but we looking at the inner affiliate margin question and we will come back to you. >> hopefully that is something in the near view as opposed to the longer view perhaps. i think that's a leading question so to speak. >> that's a yes. >> speaking frankly i hear a lot and mr.things from you
quarles on this issue and i appreciate that very much. the lack of formal action concerns me and i think it's time to move on to this. these roles capture $38.8 billion in capital for transactions. they are not inherently risky. i would ask you and your staff to move forward soon on this please. moving to something else i raised, your currently engaged in a joint comment to toe with the fdic about -- the saqqara proposal -- the need for an offset for client margin in the supplemental leverage ratio. i would like to offer a few thoughts. the number of firms providing clearing services from 88 to 55, this affects farmers and other end-users in derivative markets.
they are losing options for clearing activity. this part of the slr contributes to the closing of these markets. for what it's worth the cftc commissioners agree with me and have submitted a joint comment raising the same concerns. tonow i cannot ask you comment on any action now considering the recent extension of the comment period but as you proceed i would like to make sure that you know about those concerns and that you would be able to take my concerns into consideration as you move through the joint comment process. >> we are in the process of reviewing the comments as you pointed out. on themore note proposal. i understand the framework would significantly raise capital swaps.ments on margin congress was explicit in allowing nonfinancial end-users to continue trading in the otc
market. we were this explicit in making head in affordable to -- i'm concerned in the increase in capital requirements associated --h the swaps will make them in particular is my frustration -- such as those used to hedge oil. access to risk management products are critical and i want to make sure we do not come under pressure by way of excessive requirements imposed .n those bank counterparties i've spent a lot of time on these issues and i appreciate it if you would be willing to bear these concerns in mind which are shared by the end-user community as we move forward. i've always found you to be a practical person and i like to think that i use my time and efforts to address practical issues that impact not only my
economy back home in oklahoma but the whole country. i will yield back the balance of my time. >> thank you very much. the gentleman from california is recognized for five minutes. >> in responding to the ranking member i think it's important that fannie and freddie continued to be what they have become perhaps accidentally, federal government agencies. we need a federal backstop in terms of credit risk but never again should we have a semi-public, semi-private agency were taxpayers take the risk and shareholders tried to read the profit. mr. chairman i appreciate your patience on not raising rates. .ou have a twin mandate i'm going to ask you to consider an additional factor and that is
the profit that you create is a byproduct of your efforts at times turning over to the treasury as much as $100 billion in a single year. i want you in your decisions to reflect on the fact that that is not a dry accounting entry. it is life and death. we have limited amounts of money we can spend in congress on cancer research, body armor for our troops and research to make it better, opioid programs. so people will live or die based upon whether you are able as you have in the past to turn over nearly $100 billion of unintended profit. i realize that is not your mandate but it is life and death. we talked at another meeting about wire transfer fraud and i will get you some background material on that.
i do want to focus the committee on the fact that people are being tricked through the internet to wire their funds into a particular numbered account thinking they are sending the money to the person they are buying a house from and instead it is going somewhere else. systemave a confirmation like the british we can avoid much of that. shrinkagelance sheet that diminishes your profit that you can turn over. as you selloff your mortgage backed securities your raising mortgage costs for people. your testimony said we have a good job market. it's not good until there's a labor shortage that drives wages ofto make up for the years stagnant wages we've had over the last two decades. i hope you would aspire for more than just 4% unemployment rate.
. have a question here in your statement you comment on the federal debt. you say the federal government debt is on an unsustainable path. fiscal policy affects what you do. we also have a trade deficit about half $1 trillion a year. similar in size to the budget deficit. every year we borrow another half trillion dollars to finance that as a country borrowing from abroad. i wonder if you could say the u.s. trade deficit of over half $1 trillion a year is on an unsustainable path. i don't think i would say that. deficit is account really set by the difference between savings and investment. the reason the federal budget is on an unsustainable path is that the debt as a percentage of gdp is at high level.
it is growing faster than gdp. that cannot grow faster than gdp forever. i don't know that i would say -- the accumulated trade deficit were every year we borrow over half $1 trillion .ust adds to our foreign debt some of my colleagues have found these hearings dry and asked me to spice things up by asking an accounting principles question. [laughter] >> we have cecil, the proposal for the current expected credit the system being proposed of this may be to increase reserves